Oct 9: Osim, EMAS Offshore

The Straits Times Index (STI) on Wednesday ended 17.28 points or 0.53% lower to 3,226.71, taking the year-to-date performance to +1.95%. The top active stocks were DBS (-0.87%), SingTel (unchanged), Sembcorp Marine (+1.12%), OCBC Bank (-0.10%) and Genting Sing (-0.91%). Here are some stocks and factors to watch this Thursday morning:

Massage chair maker Osim International said on Wednesday that it was not involved in any ongoing discussions that could explain the drop in its share price over the past two days, prompting the Singapore Exchange (SGX) to issue a "trade with caution" warning. Osim closed 4.1% lower at $2.33.

Ezra’s associated firm, EMAS Offshore, kicked off its secondary listing on the Singapore Exchange's Mainboard yesterday on a lacklustre note, trading as low as 14% below its initial public offer price of $1.21 on its first day. EMAS closed at $1.045.

AUD/USD Performance Charts as at 12:00p.m. Singapore time, 8/10/2014

Risk currencies hold their ground

SThis was mainly attributed to positioning on the greenback after its recent rally, along with a reversal lower in USD/JPY. There were also a couple of Fed comments on the wires. Kocherlakota said it’s inappropriate to raise the Fed funds rate in 2015 as long as the inflation outlook remains sluggish. However, Dudley stated the forecast of rate increases in mid-2015 are reasonable. Later today we have Charles Evans speaking and, coupled with the FOMC meeting minutes, the Fed is likely to dictate the direction of the greenback in the near term.

AUD focuses on jobs

AUD/USD managed to hold on to the $0.8800 handle but I still feel it remains vulnerable to some selling. While local data is limited today, tomorrow will be a big day as jobs numbers are due out. Following the previous month’s monster 121,000 jobs gain, everyone will be looking for some clarity or perhaps a normalisation in employment.

The market is currently looking for 29,600 jobs lost and for unemployment to rise a touch to 6.2%. Any misses on the jobs front is likely to lead to further AUD selling. On the other hand, a better-than-expected reading could see AUD/USD extend its recovery.

Keppel Corp cut to "reduce" from "buy" by Nomura

Nomura has downgraded its rating on Keppel Corp ( Financial Dashboard) to “reduce” from “buy” and cut its price target from $13.20 to $9.64, based on a sum-of-parts valuation.

The Japanese broking house expects a significant slowdown next year in global jack-up rig orders, and its FY2014 to FY2016 earnings estimates for Keppel are 7% to 18% below consensus forecasts.

“The key downside risk to consensus forecasts is the optimism on Keppel’s ability to replenish its rig building order book quickly and grow its offshore and marine revenue vs our view that the slowing jack-up rig orders since early 2014 will worsen in 2015,” Nomura analysts Chong Wee Lee and Abhishek Nigam said in a note today.

Keppel’s proprietary semi-submersible rig designs are unlikely to benefit from an expected recovery in orders for floaters from 2Q2015 as drill ships are preferred, they said.

Global jack-up rig orders may weaken next year because of near-term oversupply, with a 71% y-o-y rise in scheduled jack-up rig deliveries to 65 units in 2015, they said.

Of the 65 units, only 8% have been contracted.

Average charter rates for jack up rigs have also declined, while utilization rates peaked at 88.6% in April this year.

“This may affect Keppel’s order book visibility.”

The “saving grace” for Keppel’s offshore and marine division is that higher-margin offshore and conversion works and ship repair jobs provide a steady income to the group, they said.

“We expect 65% of Keppel’s order wins in 2015 to be related to conversion works on production units, which are insufficient to make up for the revenue dip from rig building projects.”

Shares of Keppel traded at $10.28, down 0.2%, at 0252 GMT.

Sembcorp Marine raised to "add" from "neutral" by CIMB

CIMB has upgraded its rating on Sembcorp Marine ( Financial Dashboard) to “add” from “neutral”, saying the stock’s 18% year-to-date fall “is overly done”.

One of the main reasons for the decline has been multiple schedule shifts for SembMarine’s first drillship to be sailed off to Brazil, according to CIMB analyst Lim Siew Khee.

“Now that the drillship is finally on its way to Brazil, we believe investors should have less concern about SembMarine’s execution and delivery capability,” Lim said in a note.

“With the drillship finally out of its Jurong yard, we think SembMarine has crossed a new hurdle and could alleviate market fears of further delays.”

Despite upgrading her rating, Lim has cut her price target from $4.30 to $4.11, based on 13.5 times earnings, a 10% discount to the stock’s long-term average of 15 times.

Shares of SembMarine traded at $3.62, up 1.1%, at 0343 GMT.

Singapore opens for foreign judges as H.K. frets

Singapore’s move to allow foreign judges to hear commercial cases may boost its standing against regional rival Hong Kong where concerns have mounted that its judicial independence is being undermined by China.

Judges from other jurisdictions will be able to hear cross- border disputes at the Singapore International Commercial Court, according to proposed changes tabled in Parliament yesterday. Singapore, which earlier allowed foreign lawyers to advise clients on its corporate laws, will also let them appear in the new court.

Singapore, 13 spots behind Hong Kong’s fourth place for judicial independence in a World Economic Forum report last year, has seen contributions from legal services expand 46 percent to $1.9 billion in 2012 from 2007. That’s double the pace of the Chinese city in the same time. Lawyers in Hong Kong marched in silent protest in June against a policy paper from China which asked judges to be patriotic, stoking concerns over its independence from Beijing.

“Singapore, which had a reputation for being conservative and somewhat closed, having laws which many outside the country viewed as oppressive, is changing,” said Peter Goldsmith, Chair of European and Asian Litigation at Debevoise & Plimpton LLP and a former U.K. attorney general. “It demonstrates Singapore’s maturity.”

While the commercial court will “absolutely” boost Singapore’s reputation, those with a negative perception of the country’s judiciary aren’t going to change their minds, according to Law Minister K. Shanmugam, whose previous clients as a lawyer included government leaders who successfully sued opposition politicians for libel.

Fair Game

Prime Minister Lee Hsien Loong in May sued a blogger for defamation. Another blogger faces possible contempt of court action by the attorney general’s office for scandalizing the judiciary.

“In Singapore, a public figure is expected to have integrity, and if an allegation is made against him, then he is expected to either resign or clear his name,” Shanmugam said in an interview in May.

Singapore pushed ahead with its legal services reform despite concerns from some that it might lead to foreign law firms dominating the market as they do in Hong Kong.

“Even that limited opening up was, of course, not a popular move and there are good arguments both ways,” said Shanmugam, who was appointed law minister in 2008. “I wasn’t one of those who thought that it was logical to do that opening up. Nevertheless, by the time I became minister, it was government policy which I then put into motion.”

Golden Ocean Group and Knightsbridge Shipping to merge

Golden Ocean Group and Knightsbridge Shipping have today entered into an agreement to merge.

Knightsbridge will be the surviving legal entity but the combined company will be renamed Golden Ocean Group after the merger is completed.

The combined company would become one of the world’s leading dry bulk companies with a modern fleet of 72 vessels, of which 36 are newbuilds under construction.

The merger has to be approved by the shareholders of Golden Ocean and Knightsbridge in separate special general meetings expected to be held in December 2014 or January 2015.

Knightsbridge’s ordinary shares are currently listed for trading on the Nasdaq Global Select Market, and Golden Ocean’s ordinary shares are currently listed for trading on the Oslo Stock Exchange and the Singapore Stock Exchange.

Under the merger agreement, the combined company will apply for a secondary listing on the OSE and continue to trade on Nasdaq.

Shareholders in Golden Ocean will receive shares in Knightsbridge as merger consideration.

One share in Golden Ocean will give the right to receive 0.13749 shares in Knightsbridge, and Knightsbridge will issue a total of 61.5 million shares to shareholders in Golden Ocean as merger consideration.

Upon completion of the merger, the 3.07% Golden Ocean Group Limited Senior Unsecured Convertible Bond Issue 2014/2019 that was issued by Golden Ocean in January 2014 will be converted into a convertible bond in the combined company under the merger agreement.

After the merger is completed, Hemen Holding, a trust belonging to the founding family, will eventually own 42% of the shares in the combined company.

Golden Ocean Group last closed at $1.80.

Oct 8: Golden Ocean, Grand Banks Yachts, Boustead Singapore, Tat Hong, Keppel

The Straits Times Index (STI) on Tuesday ended 9.25 points or 0.28% lower to 3,243.99, taking the year-to-date performance to +2.50%. The top active stocks were DBS (-0.27%), Keppel Corp (-0.96%), SingTel (-0.80%), UOB (-0.54%) and Global Logistic (+1.87%). Here are some stocks and factors to watch this Wednesday morning:

Golden Ocean Group and Nasdaq-listed Knightsbridge Shipping have agreed to merge. Knightsbridge will be the surviving legal entity but the combined company will be renamed Golden Ocean Group after the merger is completed. The combined company would become one of the world’s leading dry bulk companies with a modern fleet of 72 vessels, of which 36 are newbuilds under construction. Golden Ocean Group last closed at $1.80.

Grand Banks Yachts says the company will be removed from the SGX Watch-List with effect from Oct 9. The maker of luxury yachts had announced its first full-year profit after five consecutive years of losses from 2009. Grand Banks Yachts closed 6.4% higher at 25 cents.

Boustead Singapore says wholly-owned subsidiary Boustead Projects has won a contract in excess of $20 million to design and build the Airbus Asia Training Centre. Boustead Singapore closed 0.3% higher at $1.75.

Tat Hong Holdings is exploring a possible spin-off and listing of part or all of its tower crane rental business in China. Tat Hong closed 1.3% lower at 75.5 cents.

Keppel Corp's subsidiary Keppel Offshore & Marine says units Keppel Shipyard and Keppel Nantong Shipyard Co. have won contracts from repeat customers worth a total of $153 million. Keppel closed 0.9% lower at $10.31.